An Answer to the Great Park Tax Question

By |August 13, 2010

A tax expert has weighed in on the controversy surrounding a special tax that future residents of Irvine’s Great Park neighborhoods might have to pay.

The plan is to have the Great Park share in something called a community facilities district tax, a special property tax typically used to pay for neighborhood infrastructure. In Irvine it could be used to pay for the Great Park.

Irvine Councilman and Great Park Board Chairman Larry Agran insists that CFD taxes that might eventually be paid in Irvine are not new taxes. This is important because when he and other Irvine officials were selling residents on the Great Park, they promised that new taxes wouldn’t be part of the deal.

However, a recent grand jury report on the Great Park dings officials for the CFD taxes, arguing that they are indeed new taxes.

The tempest came to a head at Tuesday’s Irvine City Council meeting where the city unveiled its official response to the grand jury report.

At the meeting, Agran said “I challenge any taxpayer to come forward — show me where there has been an added tax burden.”

Enter David Taussig, a CFD tax consultant who advised the city on possible tax plans to pay for the park.

No one can yet come forward to answer Agran’s challenge because, according to Taussig, the CFD tax would be on future residents of the neighborhoods around the Great Park.

However, he did say that it is fair to call the CFD a tax. Taussig said that before Proposition 13 was passed cities and counties paid the cost of infrastructure for new neighborhoods. Since then, however, public agencies have come up with CFD taxes as a way to have the new development “pay for itself.”

Typically, with City Council approval, the developer arbitrarily votes to place the tax on itself to pay for the new development’s infrastructure. When a resident or a business moves in, the CFD tax shows up on their property tax bill as a special tax on top of their usual property tax.

Taussig acknowledged that people who eventually move into the neighborhoods around the Great Park will probably be paying for the park through the CFD tax. Taussig also said that residents would be informed about the CFD tax upfront, through the paperwork they fill out to purchase the home, and that it would explicitly say the tax is being used to pay for the park.

Home buyers can then decide if they want to dole out the extra dollars to pay for the park, or if they want to buy a home somewhere else.

“Whether it’s fair or not that the Great Park people have to pay so much — they don’t have to buy there either,” Taussig said. He added “My prediction is — the economics work out so if you’re buying in the area and your taxes are higher and the house is priced at the same price as somewhere else in Irvine, you’re probably going to buy somewhere else in Irvine.”

That, Taussig said, could lead to a drop in the prices of the homes, leveling out the financial blow to would be home buyers, and a consultant hired by the city to look at the CFD tax issue predicted as such. But that’s just in theory — if it turns out that moving next to the Great Park is the “in thing,” Taussig said, then the affect of the CFD tax on home values would be negated.

So, was the grand jury right in their assertion that CFD taxes break a promise by Irvine leaders not to levy new taxes on residents to pay for the park?

Taussig couldn’t confirm whether the CFD taxes qualify as a new tax, but he did say it’s a tax that residents of the Great Park neighborhoods, in the future, might have to pay to fund the park.

“Is that no tax for any Irvine folks ever? No — the people living in that area will be paying,” Taussig said.